Zebra, Donkey Hybrid Born in Georgia
A zedonk, an unusual cross between a donkey and a zebra, is turning heads at the Chestatee Wildlife Preserve after being born there about a week ago. She has black stripes on her legs and face. (July 29)
The Wages of Sin: Former Citi Execs Pay Token Fines for Lying to Investors
Banana republic, Banking industry, CEO compensation, Corporate governance, Credit markets, Legal, Regulations and regulators Comments (0)
A news story today provides further confirmation of the rule by the banking classes in the US, with only token gestures to the rule of law. Per Bloomberg (hat tip Tom Adams), Citigroup is ponying up $75 million to settle SEC charges that the giant bank was not sufficiently forthcoming in the runup to the financial crisis about losses on billions of dollars of subprime exposures:
The company made misstatements on earnings calls and in financial filings in 2007 about assets tied to subprime loans, the Securities and Exchange Commission said in a federal lawsuit yesterday in Washington. Some disclosures omitted more than $40 billion in investments, it said. Citigroup’s former chief financial officer and head of investor relations agreed to pay a total of $180,000 for failing to disclose the risk….
Citigroup executives publicly stated four times in 2007 that the New York-based bank had reduced its exposure to subprime mortgage securities by 45 percent to $13 billion, as investors and analysts clamored for information about the deteriorating market.
The Financial Times provides additional detail:
The SEC said Citi stated four times in July and October 2007 that it had reduced its subprime exposure from $24bn to $13bn at the end of 2006. Yet the bank failed to inform investors until November 2007 that it held more than $40bn in “super senior” tranches of CDOs backed by subprime mortgages and related instruments called “liquidity puts”, the SEC claimed.
Yves here. I guess I am a bit thick. In 2007, subrpime exposure was the thing investors were most worried about. Recall that the first acute phase of the financial was in August-September 2007, when the asset backed commercial paper started contracting and money market investors shunned funds that had any taint of subprime.
Recall also that Sarbanes Oxley, passed in 2002, provides that a public company’s principal executive and principal financial officers certify both annual and quarterly financial statements for accuracy and completeness. Section 906 further
contains a certification requirement subject to specific federal criminal provisions and that is separate and distinct from the certification requirement mandated by Section 302.
So….what do we have here? A $75 million fine, imposed on the company…and so coming out of Citi’s coffers, which comes (in theory) from shareholders (but given that financial firms pay high percentages of revenues in bonuses, this fine would have a microscopic impact on pay levels).
More striking is the mere slap on the wrist of the execs involved. The former Citi chief financial officer, Gary Crittenden, who held the job from March 2007 to March 2009, will pay $100,000 of the total $180,000, with Arthur Tildesley, then in charge of investor relations, agreeing to cough up $80,000 to settle charges.
To give you a sense of proportion, Crittenden was Citigroup’s second highest paid officer. From Citigroup’s 2009 proxy:
He also sits on 8 boards. Do the math: this settlement is a mere inconvenience. And note, more important, the failure of the SEC to pursue Chuck Prince (in charge through November 2007).
And Citi virtually thumbed its nose at the charges in its statement:
Mr. Tildesley is a highly valued employee of Citi and is making significant contributions to the company.
As Tom Adams noted:
When people talk about banksters this is what they mean – lying with impunity is not only not problematic, it is critical to career advancement and company “success”.
The message seems pretty clear. Sarbox was intended to curtail phony corporate accounting in the wake of Enron. But why resort to complicated transactions like the energy company’s famed Raptors when Citi shows that mere lying will produce the same results with much less fuss?
July 29, 2010
Greece Fuel Strike Stranded Thousands of Tourists
Greece fuel strike by truck drivers has stranded thousands of tourists. Greece fuel strike has stranded tourists traveling with cars from neighboring countries as Greece faces huge fuel shortage.
Nationwide strike of truck drivers has not only dried up fuel but also created shortage of medical supplies and food in some regions. According to officials some 100,000 tourists from neighboring countries like Bulgaria, Russia and Serbia who are traveling by car have stranded as most petrol pumps dried out in Greece.Thousands of tourists have abandoned their cars and in unprecedented move Greece officials are beseeching visitors to stock up on fuel in Macedonia. Tourists are very angry with the situation. Hotel Industry has said that booking from neighboring countries has some down to zero.
Even ferries don’t have any fuel which has stranded thousands of tourists on the docks not being able to reach their destinations. A couple could not reach even on their own wedding.
Situation in Athens is getting tense as capital too runs out of fuel. Greek Prime Minister has ordered truck drivers to get back on work else they will face huge penalties including being stripped of their licenses and their vehicles will be requisitioned.
*Striking fuel drivers in Greece said negotiations with the government have collapsed. The drivers are protesting an overhaul in licensing rules that are among the measures the government agreed to in order to get loans from the International Monetary Fund and other European countries. The strikes, which have already lasted for five days, have triggered gasoline shortages across the country. Greece’s government said it has not ruled out ordering civil mobilization to get supplies moving.
Good luck Greece, once tourists decide not to come it’s game over.
July 29, 2010
Swiss Franc + Euro
July 29, 2010